Comex Gold Futures (GC) Technical Analysis – October 6, 2014 Forecast

After several days of consolidation and attempts to breakout to the upside, December Comex Gold futures broke sharply to the downside on Friday, driven lower by the relentless strength of the U.S. Dollar.

The catalyst behind the selling pressure was the better-than-expected U.S. Non-Farm Payrolls report. This report showed the economy added 248K new jobs in September, beating the estimate of 215K. The unemployment rate also fell to 5.9%, its lowest level since 2008.

The bullish jobs report sent U.S. interest rates higher, making the U.S. Dollar a more attractive investment. Demand for dollar-denominated gold tends to fall when the dollar moves higher.

The momentum into the close is likely to give gold a downside bias on Monday. Look for traders to go after the December 31, 2013 bottom at 1185.00 early in the session. The next support under this level is $1182.30. The daily chart opens up under this level with the next support almost $100 lower.

Since finding the next support is actually a guess at this point, traders should concentrate on the chart patterns and the order flow. These two factors should let you know whether there are real buyers coming in or profit-takers. Due to oversold technical conditions, the market may be ripe for a short-covering rally just to alleviate some of the downside pressure. Since the fundamentals are overwhelmingly bearish, however, any short-covering rally is likely to be met with fresh selling pressure.